Heated Opposition to Energy Bill

Struggling commercial property owners object to timing and breadth of proposed building standards.

All eyes in commercial real estate will turn to the U.S. Senate this fall. Will it follow the lead of the U.S. House of Representatives and pass energy legislation establishing a national building code mandating stricter energy efficiency standards in commercial buildings?

As they continue to try to convince key senators that the bill would critically injure an already ailing industry, several groups are warning building owners to prepare for the new rules. “One way or the other, it looks like these energy provisions are in our future,” says Karen Penafiel, vice president of advocacy for the Building Owners and Managers Association (BOMA) International in Washington, D.C.

Too far too soon

On June 26, the House passed the American Clean Energy and Security Act of 2009 sponsored by Henry Waxman (D-Calif.) and Edward Markey (D-Mass.).

The bill includes a new Retrofit for Energy and Environmental Performance program that would offer owners financial incentives to increase energy efficiency in existing buildings. The Real Estate Roundtable based in D.C. says that an owner of a 100,000 sq. ft. building who installs upgrades that create a 40% improvement in energy efficiency would receive $1.60 per sq. ft., or $160,000.

The bill also includes a building labeling program under which owners of new buildings would be required to display or make available the building's designed and actual energy performance for all sales, leasing and financing transactions.

The most controversial part of the bill is a cap-and-trade plan designed to reduce U.S. greenhouse gas emissions by 17% by 2020. To achieve that goal, the legislation directs the Department of Energy to work with The American Society of Heating, Refrigerating and Air-Conditioning Engineers to create a model building code requiring a 30% improvement in commercial buildings' energy efficiency over 2004 standards by 2010 and a 50% improvement by 2016.

The deadlines are a major concern for industry trade groups, who claim the technology simply doesn't exist yet for commercial buildings to comply with higher levels of energy efficiency so soon. “It's like saying we want everybody to build cars that are more efficient than the Prius starting next year,” says Roger Platt, counsel at the Roundtable.

The cost of implementing the new code also is a concern, according to Dan Probst, chair of Jones Lang LaSalle's energy and sustainability service in Chicago. “Building a building that's 30% more efficient than code requirements from five years ago is relatively easy because of advances in building systems,” Probst maintains. “The 50% goal is clearly more of a stretch.”

Eileen Lee, vice president of energy and environmental policy at the National Multi Housing Council in D.C., says when these building codes hit, “the industry will just be coming out of this slump.”

The national building code also rankles trade groups, who say it will create a patchwork of codes for developers to navigate. There will be a national building code governing energy efficiency, says Platt, while all other aspects of building codes will remain governed by state and local governments.

Next stop: The Senate

Sen. Jeff Bingaman (D-N.M.) has introduced a Senate bill that largely mirrors those provisions in the House bill. “In developing these provisions, the chairman and his committee staff heard the views from folks on all sides of this issue — including those representing trade organizations,” says Bill Wicker, a spokesperson for Bingaman.

Bingaman's bill hasn't cleared committee and made it to the Senate floor for a full vote. President Barack Obama's push for health insurance reform will take precedence, says Penafiel.

“Senate Democrats probably won't get the votes to pass the climate change bill,” she predicts. “However, we're also hearing if they're unable to pass the broad bill, they'll try to pass the energy portion of that bill, including the provisions we strongly oppose.”

Platt says that one big win often foretells another. “I suspect that if there is a success on the president's health care agenda,” he observes, “that will give him greater political capital to expend on climate change legislation.”

G.M. Filisko is a reporter and attorney based in Chicago who writes regularly on legal and real estate issues. She can be contacted at gabifil@rcn.com.